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Thursday 26 January 2017


Guest Post Written by David Vardy

Dark NL sparked an investigation by the PUB into the reliability of our power system, an investigation which is going into its fourth year. It has received little media coverage, despite its great importance.

On January 20, 2017 the Public Utilities Board (PUB) issued an Order, P.U. 2(2017), striking down expert evidence filed by the Grand River Keeper Labrador (GRK), a registered intervenor. The Order is part of the PUB’s investigation into supply issues and power outages which they announced on January 17, 2014. The investigation covers matters relating to the reliability and availability of power both before and after interconnection with Muskrat Falls and was prompted by a number of power outages which took place in 2013 and early 2014. The Board’s Order has the effect of removing expert evidence relating to two major risks to the power system from further consideration during the investigation into the supply of power. The purpose of this post is to recommend solutions to this problem.
GRK Focus on North Spur and Water Management
The GRK focused its attention upon the availability and reliability of power from Muskrat Falls both with respect to the North Spur and to the effectiveness of the water management agreement on the Churchill River. In response to a motion by NL Hydro, the PUB struck two
reports prepared by Dr. Stig Bernander, an internationally recognized geo-technical expert, concerning the stability of the North Spur. It also granted Hydro’s motion to strike a report prepared by Philip Raphals of the Helios Centre concerning the impact of the recent decision of the Quebec Superior Court upon the ability of CFL(Co) to manage the water flows in the Churchill River, which concluded that, should the court decision be upheld, the capacity available to Hydro to serve Island demand would be far lower than the amounts claimed by the utility.

David Vardy
The evidence filed by GRK was opposed by NL Hydro on the grounds that the matters raised were beyond the scope of the hearing. They argued that the Bernander reports were related to engineering and construction and that the PUB had excluded such matters from the investigation. And they, perplexingly, claimed that, while the Court’s decision “may have an impact on the manner in which water will flow from the Churchill plant and the timing of energy produced at Muskrat Falls”, it nevertheless has no implications regarding the availability or reliability of power.

The GRK has argued that the remediation of the stability problems at the North Spur may be inadequate and that further evaluation by geo-technical experts is necessary. Unless adequate measures are undertaken in advance, any failure of the Muskrat Falls dam would likely have catastrophic consequences for Island electricity supply.

On the question of the actual capacity at Muskrat Falls to which NLH will have access, GRK’s evidence pointed out that Muskrat Falls relies on a Water Management Agreement to which Hydro Quebec is not a signatory, which in turn relies on Nalcor’s interpretation of the renewal terms of the Churchill Falls Power Contract. The Quebec Superior Court decision clarifies the powers of Hydro Quebec under the Renewal Contract, precluding the banking and withdrawal of power upon which Nalcor is relying for Muskrat Falls to generate its full 824 MW potential. GRK argues that, in order to properly assess the reliability of Island power supply after interconnection, the PUB needs to be aware of the amount of power that will be actually available to Hydro to meet its system peak, which is far less than the 824 MW cited in Hydro’s documents.

The PUB rejected these arguments, stating that the information in both reports “would not add to the Board’s understanding of the issues or assist the Board in its review and may serve to unduly complicate the review.”

Inconsistent approach to generation and transmission
The power outages three years ago prompted the PUB to investigate availability and reliability. The PUB decided to break its investigation down into two phases: the first relating to the Isolated Island system before interconnection with Muskrat Falls and the second relating to post interconnection issues. Their consultant, the Liberty Group, has now completed two reports, one for each of these two phases.

The second Liberty Group report deals at length with transmission issues after interconnection, including the transmission line and submarine cables across the Strait of Belle Isle, as well as with on-Island generation, but not with issues at the Muskrat Falls generation site. Reports prepared for Newfoundland Power and the Consumer Advocate also deal with design issues associated with the transmission line but steer clear of the Muskrat Falls site.

Both water management and the North Spur are issues relating to the generation component of our electric power system. The PUB has been inconsistent, both in its conduct of the investigation and in its ruling on GRK’s evidence. The PUB has allowed the production by Newfoundland Power and the Consumer Advocate of expert evidence concerning the reliability of the transmission components of the Muskrat Falls Project, and indeed has mandated its own experts (Liberty) to look into these questions. However, it has confined its investigation of generation issues to sources on the Island, excluding Muskrat Falls. The effect is that, in its investigation into reliability of the post-Muskrat system, the PUB is acting as if it had jurisdiction over the transmission components of the Muskrat Falls Project, but not the generation component. The 2013 Muskrat Falls Project Exemption Order, which removes the Muskrat Falls project from PUB jurisdiction, makes no such distinction.

The other intervenors include Newfoundland Power, Industrial Customers, Vale, Danny Dumaresque and the Consumer Advocate. None of these intervenors took a position with regard to NL Hydro’s motion to strike the GRK reports. The Consumer Advocate did however make a submission arguing that it would be premature to do so. The GRK must now decide, and quickly, if it will appeal the decision of the PUB to the Appeal Division of the Supreme Court. However, the cost of pursuing an appeal may well be beyond its reach.

My first recommendation is to the Consumer Advocate. Given the importance of post-connection reliability to Island consumers, the Consumer Advocate should offer to join in such an appeal, in order to ensure that all matters relating to availability and reliability of power are addressed by the Board. By so doing the Consumer Advocate will be discharging his mandate to protect the consumer by ensuring “lowest cost consistent with reliable service.”

My second recommendation concerns the Muskrat Falls Project Exemption order, issued by the provincial government in 2013, which removed the Muskrat Falls project, including both transmission and generation, from the jurisdiction of the PUB. This Order reaffirmed an earlier Order which had been issued at a time when Lower Churchill development was intended principally for export rather than use by local consumers.

The government should remove the fetters upon the PUB imposed by the Exemption Order (O.C. 2013-342) so that the Board will be able to examine all matters relating to reliability and availability of power, as well as matters relating to its cost, which have up to now been outside of its jurisdiction. This can be done by rescinding the Order.

Rescinding the Exemption Order would significantly improve the oversight and independent assessment of the Muskrat Falls project and would be a vital component of government’s commitment to improved transparency and accountability. It would restore the full powers of the PUB and allow it to embark upon an all-encompassing inquiry into the reliability and availability of power. Immediate action by government would empower the PUB to discharge its duty in the investigation into supply issues and reliability of power and to ensure that the electrical power system is sufficiently robust to maintain an adequate power supply at all times.

David Vardy